Cross Border Listing Announcements and Stock Returns of Firms Listed at Nairobi Securities Exchange, Kenya
Wainaina, Beatrice Njuhi
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Financial markets globalization has led to a high number of companies cross listing their shares on security exchanges beyond their local market boundaries. Academic dissertations continue examining the effects that cross listing has on various managerial aspects of a company including investment returns, value of the firm and also performance. In East Africa region, the companies cross list in four organized security exchanges namely Rwanda Securities Exchange, Dar-es Salam Securities Exchange, Uganda Securities Exchange and Nairobi Securities Exchange. This research worked on finding the relationship between cross border listing announcements and stock returns for firms that have a listing at the Nairobi Securities Exchange. As part of specific objectives, this research sought to determine how cross border listing announcement in the Dar-es Salam Securities Exchange, Rwanda Securities Exchange, and Uganda Securities Exchange behaves in relation to the return in stocks at the Nairobi Securities Exchange. Anchoring the study were two theories, namely Signalling Theory and the Efficient Market Hypothesis, to explain the relationship between cross border listing announcements and stock returns at all Nairobi Securities Exchange listed firms. The explanatory research methodology on seven cross listed firms with a forty-day event window was applied. Twenty days’ pre-announcements and twenty days’ post announcements. The secondary data for the research was obtained using data collection sheets. In analysing the secondary data, descriptive methods came in handy assisted by SPSS version twenty-four. The study also applied the two tailed test analysis in determining whether cross listing announcements influences stock returns of cross-listed firms trading at the Nairobi Stock Exchange. The results indicate that that p values for Keya Airways, East Africa Breweries Limited, Jubilee, Nation Media, Uchumi and Kenya Commercial Bank cumulative abnormal returns on Dare-Salam Securities Exchange are insignificant at 95% confidence interval. The findings also indicate that that p values for Kenya Airways, East Africa Breweries Limited, Jubilee, Equity, Nation Media, Uchumi and Kenya Commercial Bank cumulative abnormal returns on Uganda Stock Exchange are all more than 0.05 (P > 0.05) hence, insignificant. Finally, the results indicate that p values for Kenya Airways, East Africa Breweries Limited, Jubilee, Equity, Nation Media, Uchumi and Kenya Commercial Bank cumulative abnormal returns on Rwanda Securities Exchange are insignificant at 95% confidence level. The study concludes that announcements on cross listing bear an insignificant impact on stock returns performance of firms that have been cross listed. However, there are anomalies observed in the markets and this renders the bourses inefficient since it is possible that investors could earn abnormal returns just be analysing patterns and setting approaches accordingly. The research recommends that the regulators of the East African bourses that is RSE, USE and DSE should aim to strengthen their market efficiency even further to discourage information leakage and unfair abnormal returns. In addition, those firms aiming to cross list on different bourses should not entirely use such announcements as a signal for new investors given that not much difference in stock returns is expected.